LA Insurance sells motorists split no-fault auto insurance policies that only cover Personal Injury Protection (PIP) that are written by USA Underwriters, a Royal Oak-based insurer that shares the same corporate headquarters as LA Insurance. USA Underwriters' registered agent in state incorporation records is LA Insurance CEO Anthony Yousif.

Correction appended

A Royal Oak-based auto insurance carrier has asked a state judge to let it continue selling policies through L.A. Insurance that only cover vehicle damage after state regulators sought to curtail the practice.

USA Underwriters, a carrier that shares the same corporate headquarters in Royal Oak with the L.A. Insurance retail chain, sued the state Department of Insurance and Financial Services (DIFS) last week, seeking an injunction that would let the company continue to write policies that only cover the comprehensive and collision portion of no-fault plans.

The insurer claims it could be forced out of business if the state insurance department's interpretation of a new auto insurance reform law stands.

The lawsuit is the latest salvo in a regulatory battle between the state insurance department and L.A. Insurance and its affiliates. Attorneys for USA Underwriters allege in the lawsuit that DIFS has waged a "one-sided war" against the insurer and L.A. Insurance.

Since 2012, DIFS has allowed USA Underwriters to write comprehensive and collision policies that LA Insurance pairs with a separate insurance policy for Personal Injury Protection coverage in plans sold predominantly in Michigan cities with higher concentrations of poverty — where the insurance rates are often the highest in the state.

"Separating the collision and comprehensive coverage from the mandatory coverages ... allows (USA Underwriters) to charge an amount that is affordable to an economically disadvantaged customer base, which would otherwise be price out of the insurance market," USA Underwriters attorney David Fink wrote in a Nov. 6 court filing.

On Sept. 11, the state insurance department ordered USA Underwriters to cease selling collision-only insurance plans by Dec. 9, saying they violate a section of the no-fault auto insurance reform law that took effect June 11.

USA Underwriters' attorneys charge in the company's lawsuit that state insurance regulators "sensed an opportunity to force (the company) out of business" by asking lawmakers to add a "last-minute" provision prohibiting split insurance policies.

"The new law will have a devastating impact on" USA Underwriters, Fink wrote in the lawsuit. "Indeed, the company's ability to stay in business will be in jeopardy. The economic impact will be incalculable and is likely to lead to the loss of 50-70 jobs."

The lawsuit asks Michigan Court of Claims Judge Cynthia Diane Stephens to overturn the insurance department's denial of an appeal to let USA Underwriters continue selling comp and collision-only policies "until, at the earliest, July 2020."

In the suit, USA Underwriters accuses state insurance regulators of engaging in "a long-standing practice and pattern of unfairly singling out (USA Underwriters) for adverse treatment" against itself and L.A. Insurance.

"DIFS has gone so far as to call (USA Underwriters) customers to falsely inform them that they have been overcharged," the lawsuit alleges.

Andrea Miller, a DIFS spokeswoman, said the department does not comment on pending litigation.

In recent years, state insurance regulators have come down hard on L.A. Insurance for its practice of selling short-term insurance plans that allow motorists to get their vehicle legally registered with the Secretary of State's Office — and then drive the rest of the year without insurance.

Under state order, L.A. Insurance stopped marketing and selling a seven-day insurance plans written by North Carolina-based carrier Integon National Insurance Co. in September 2018.

But the company's insurance agencies, which are often located next to Secretary of State offices, have continued to sell insurance plans that expire within the first month, sometimes in as little as 13 days.

Crain'sdocumented one such case in an Oct. 20 article about the state ordering USA Underwriters to cease sale of comprehensive and collision-only plans, which L.A. Insurance often pairs with road-side assistance plans that inflate the down payment costs.

The DIFS spokeswoman previously told Crain's that split-policy plans "being sold simultaneously can raise concerns" and "can be confusing to consumers, who may not fully understand the details of the products being purchased,

USA Underwriters is a corporation registered by Anthony Yousif, the CEO of L.A. Insurance. As a regulated insurance carrier, USA Underwriters operates separately from L.A. Insurance, according to the company.

Editor's Note: An earlier version of this article incorrectly described USA Underwriters as selling only Personal Injury Protection auto insurance policies. The Royal Oak company sells only comprehensive and collision coverage auto insurance policies.